Equatorial Guinea

Executive Summary

Equatorial Guinea’s rise to become a country with one of the highest GDPs per capita in sub-Saharan Africa has been driven almost entirely by U.S. companies’ foreign direct investment (FDI) in the oil and gas sector. In the mid-2010s, the decline in both oil prices and the country’s hydrocarbon reserves caused an economic recession that has continued for six years and has been exacerbated by the COVID-19 pandemic. While it still ranks among the top five richest sub-Saharan countries, the country’s gross national income (GNI) per capita plummeted from $14,030 in 2013 to $5,810 in 2021.

Despite its economy’s dependence on FDI, the country presents a complex, challenging environment for foreign investors. Equatorial Guinea ranks near the bottom of the list for various global indices, including those for corruption, transparency, and ease of doing business, and the government suffers from a lack of technical expertise and capacity to implement many of the reforms it proposes. Freedom of the press is limited, and public information on laws and regulations is not readily accessible, creating an opaque operating environment that many outside investors have difficulty navigating. Furthermore, both senior leaders of the ruling Democratic Party of Equatorial Guinea (PDGE) and members of the president’s extended family own a significant number of businesses in diverse industries, dominating the private sector and creating major conflicts of interest in a country known for pervasive corruption.

On January 1, 2022, the Central African Economic and Monetary Community (CEMAC), of which Equatorial Guinea is a member, began enforcing new foreign currency regulations on companies operating in extractive industries. While there continue to be negotiations on the final implementation of these regulations, they are likely to impact foreign firms’ willingness to invest in the hydrocarbon sector in Equatorial Guinea and other CEMAC countries. Finally, as a small country with an estimated population of 1.2 million residents and an underdeveloped education system, Equatorial Guinea suffers from a shortage of both skilled and unskilled labor, which affects many businesses’ abilities to operate competitively.

In the face of the country’s growing economic and fiscal challenges, the International Monetary Fund (IMF) approved a $282.8 million, three-year Extended Fund Facility (EFF) arrangement in December 2019, which required the government to implement reforms to improve transparency, good governance, and the business environment. Between 2019 and 2021, the government passed laws, issued decrees, and established institutions to comply with these requirements. It implemented a new anti-corruption law, created an Investment Promotion Center (IPC), passed an updated labor law, announced the privatization of its main state-owned enterprises (SOEs), and launched its Single Business Window to simplify the process of registering a business. Some of these initiatives have had modest success, while most exist on paper only.

On the surface, Equatorial Guinea appears to provide opportunities for foreign investment. In addition to its hydrocarbon reserves, the country has rich soils, abundant fishing waters, vast forests, eye-catching landscapes, relatively developed road infrastructure, and a strategic location for maritime trade. Before investing in Equatorial Guinea, however, potential investors should conduct extensive research and carefully consider both the potential benefits and pitfalls of establishing operations in the country’s opaque and challenging environment.